Zhongda Seed Industry: Profits Continue to Decline, Holding 300 Million in Wealth Management Products, 60% of Assets Are "Cash-Like" Still Planning to Go Public for Fundraising | IPO Watch

On March 13, Xiangyang Zhengda Seed Industry Co., Ltd. (hereinafter referred to as “Zhengda Seed Industry”) will submit its IPO application to the Beijing Stock Exchange, with a public offering of no more than 48.0495 million shares.

The author notes that during the reporting period, Zhengda Seed Industry’s seed business revenue has long accounted for over 90%, while net profit has declined year by year, and its performance growth has attracted key inquiries from the Beijing Stock Exchange. Financially, the company has no short-term or long-term loans, with total monetary funds and bank wealth management accounting for over 61% of assets, and idle funds have already covered the total fundraising amount. More attention is drawn to its continuously low seed capacity utilization rate, which was only 18.43% in the first half of 2025, yet it still plans to invest 234 million yuan to add 10,000 tons of capacity. The necessity of expansion and the reasonableness of the fundraising are central to the review.

Profit Continues to Decline, Product Structure Shows Clear Single-Product Characteristics

Zhengda Seed Industry is a seed enterprise mainly engaged in the research, production, and sales of corn seeds, with an integrated breeding, propagation, promotion, and service system.

From a business perspective, the company’s main operations include seed business, breeding agency, and seed technology services, with seed business being the core. During the reporting period, sales revenue from this segment was 307.1789 million yuan, 352.6782 million yuan, 352.6915 million yuan, and 84.4196 million yuan, accounting for 98.36%, 88.07%, 94.9%, and 98.44% of the main business revenue respectively, maintaining over 90% for a long time, indicating a significant single-product feature.

In response, Zhengda Seed Industry states that a relatively single revenue structure may reduce the company’s risk resistance. When downstream market conditions change unfavorably due to policy factors, natural conditions, pests, or diseases, the company’s operating income and profit levels could be significantly impacted.

It is worth noting that although the core seed business revenue has maintained growth, the company’s overall performance has been unsatisfactory. During the reporting period, operating income was 319 million yuan, 409 million yuan, 380 million yuan, and 90 million yuan, showing a fluctuating trend. Net profit has continued to decline, at 94.694 million yuan, 88.4316 million yuan, 81.1331 million yuan, and 11.9412 million yuan respectively. How to sustain profitability and growth in the future remains an urgent issue for the company.

In response, the Beijing Stock Exchange requires Zhengda Seed Industry to supplement explanations on the cycle and changes of seed procurement, processing, packaging, pre-receipt of payments, ordering, shipping, and returns settlement, as well as seed purchase and sowing cycles in main planting areas, combined with upstream and downstream conditions, cycle change factors, distributor stocking policies, and farmers’ planting habits. Further analysis should be provided on the reasons for the performance decline in the first half of 2025, and whether the procurement and sowing situation of downstream farmers matches the sales performance of comparable companies in the industry.

Sixty Percent of Assets Are “Cash-Like” Assets, Fundraising Projects Questioned

Zhengda Seed Industry plans to raise 283.2606 million yuan in this IPO, which will be used for the construction of the Yunnan Zhengda Seed Processing Center and the second phase of the corn seed processing project at Zhangye Zhengda Bofeng Seed Industry Co., Ltd., with details as follows:

The reasonableness and necessity of this fundraising plan are subject to doubt. As of the end of 2022, 2023, 2024, and June 2025, Zhengda Seed Industry’s monetary funds were 29.9924 million yuan, 70.4453 million yuan, 140.3276 million yuan, and 133.8067 million yuan respectively, with no short-term or long-term loans during the reporting period, indicating a very ample capital chain.

More critically, the company also holds a large amount of idle funds used to purchase bank wealth management products. During the reporting period, the balance of trading financial assets (bank wealth management products) was 302.0074 million yuan, 295.2084 million yuan, 331.2611 million yuan, and 303.9698 million yuan. Combined with monetary funds, these amounts accounted for 58.66%, 57.36%, 62.37%, and 61.73% of total assets during the respective periods. This means that the combined proportion of monetary funds and trading financial assets has always been above 57%, reaching 61.73% in the first half of 2025. The financial products alone have fully covered the total amount of 283.2606 million yuan to be raised in this IPO. Given the abundant funds and large idle cash for investment, the rationale for the company to proceed with the IPO fundraising is in need of explanation.

Regarding the fundraising projects, the company intends to allocate 82.58% (233.9277 million yuan) of the funds to the Yunnan Zhengda Seed Processing Center construction project, which will add an annual capacity of 10,000 tons of corn seeds. However, the prospectus shows that during the reporting period, the capacity utilization rate of the company’s seed products has remained low, at 63.12%, 66.05%, 59.94%, and only 18.43%, never exceeding 70%, and less than 20% in the first half of 2025. There is a clear problem of capacity idle. Despite this, the company still plans to expand significantly, raising questions about the necessity of the project.

In response, the Beijing Stock Exchange also requires Zhengda Seed Industry to analyze the operational status and capacity utilization of each production base, explain the reasons for the low utilization rate in the most recent period, and whether there are significant differences compared to industry peers. Additionally, the company should analyze the capacity utilization rate of the Yunnan production base, sales-to-production ratios, sales growth, and demand changes in sales regions, to assess whether there is a risk of idle capacity for the 10,000-ton expansion.